New Virginia Legislation Addresses Thorsen Case

The Virginia General Assembly has passed SB 1140 and HB 1617 both of which address the issues raised in Thorsen v. Richmond Society for the Prevention of Cruelty to Animals (786 S.E.2d 453 (Va. 2016).  As may be recalled, the Thorsen case involved an error in the drafting of a Last Will and Testament that resulted in the intended beneficiaries receiving a smaller amount than was originally expected.  In connection with a lawsuit for legal malpractice, the Virginia Supreme Court found that a third-party beneficiary may sue to enforce its rights even though those parties are not known for many years, which is very often the case in estate planning matters. 

Now under the aforementioned legislation, the statute of limitations for legal malpractice relating to estate planning is five years if the representation was based on a written contract and three years if the representation was based on an unwritten contract.  The statute of limitations begins to run on the date representation is complete.  Furthermore, a third-party has standing to sue “only if there is a written agreement between the individual who is the subject of the estate and the defendant that expressly grants standing…”  This legislation is effective July 1, 2017.  Fortunately once in force, the potential chilling impact the Thorsen case had on the estate planning process will hopefully be overcome, and attorneys and clients will be able return to having an attorney-client relationship without having to watch out for disgruntled beneficiaries who may appear decades later.  #estateplanning #estateadministration #Thorsen @bgnthebgn

Proposed Legislation Addresses Thorsen Case

booksAn earlier article talked about the Virginia Supreme Court case of Thorsen, et al. vs. Richmond Society for the Prevention of Cruelty to Animals (RSPCA) that was decided in June of this year.  Thorsen involved an error in the drafting of a Last Will and Testament that resulted in the intended beneficiaries receiving a fraction of what they would have otherwise received.  Those intended beneficiaries sued for legal malpractice.  The Virginia Supreme Court found that a third-party beneficiary who is ‘clearly and definitely’ the intended beneficiary of a contract (even one where no written agreement exists) may sue to enforce its rights derived from the contract even though the third-party beneficiary may not know it is a beneficiary for many years (as is the case in most estate planning documents).  The impact of Thorsen on individual clients and estate planning attorneys was wide spread, although clients may not have directly been aware that they were being impacted.   

Now, as was suggested would be the case, proposed legislation will be presented to the Virginia General Assembly in the 2017 Session that will look to address the concerns raised as of a result of the Thorsen case.  In particular, a proposed amendment to Section 64.2-520 of the Virginia Code would clarify that an action for damages based on legal malpractice involving an estate plan “shall accrue upon completion of the representation in which the malpractice occurred.”  Furthermore, only the individual client, his or her legal representative (in the case of incapacity) or the personal representative or trustee (in the case of death) can bring the action.  The action for damages must be brought “within five years after the cause of action accrues”.  The proposed legislation, if passed, would not take effect until July 1, 2017.

Furthermore, a new statute (Section 64.2-404.1) is being proposed that would allow for the court to reform a Last Will and Testament to reflect the individual client’s intentions, provided clear and convincing evidence of intent are presented and the terms were impacted by a mistake of fact or law.  This new statute would also permit reformation of a Last Will and Testament to achieve an individual client’s tax objectives.  The reformation action must be filed within one year of date of death and notice must be provided to all interested parties.  The proposed legislation, if passed, would take effect on July 1, 2017.

Ultimately, the proposed legislation is meant to apply similar rules to wills that are currently applied to trusts under the Uniform Trust Code.  The expectation is that by passing these statutes, the overall chilling impact the Thorsen case had on the estate planning process is overcome, and attorneys and clients can return to having an attorney-client relationship without having to watch out for disgruntled beneficiaries.  The estate planning process can be difficult enough for individuals to begin without having both the attorney and the client leery of unintended consequences.  However, at this juncture, only time will tell whether the General Assembly passes the legislation.  #estateplanning #estateadministration #Thorsen @bgnthebgn

Caveat Venditor vs. Caveat Emptor – Thorsen Case Highlights How Attorney and Client Must Beware

The recent opinion from the Virginia Supreme Court in the case of Thorsen, et al. vs. Richmond Society for the Prevention of Cruelty to Animals (RSPCA) contains lessons for attorneys and clients surrounding the preparation of estate planning documents. 

The case involved the preparation of a Last Will and Testament in 2003 in which Alice L. Cralle Dumville, the testatrix (or creator of the will) desired to make sure that her estranged husband did not receive any of her estate should she die during the pendency of the divorce.  To that end, she asked an attorney, James B. Thorsen, to prepare a will leaving her assets to her mother, and if her mother predeceased, to the RSPCA.  Ms. Dumville died in 2008 having had her mother predecease her in 2007. The RSPCA was notified that they were the beneficiary of Ms. Dumville’s estate, except a problem was discovered with the will.  The will left only Ms. Dumville’s tangible personal property to the RSPCA and made no provision for her real property, which would pass by intestacy to Ms. Dumville’s two heirs at law.

Mr. Thorsen filed suit to correct the ‘scrivener’s error’ in the Circuit Court of Chesterfield County, but the Circuit Court found that the language of the will was clear in that only the tangible personal property was to be distributed to the RSPCA, while the remainder of Ms. Dumville’s assets would pass by intestacy.   The RSPCA then sued Mr. Thorsen in Richmond Circuit Court for breach of contract-professional negligence stating that it was a third-party beneficiary to the agreement between Mr. Thorsen and Ms. Dumville.  The Circuit Court agreed and Mr. Thorsen appealed to the Virginia Supreme Court arguing that (a) the RSPCA was not an intended third-party beneficiary, (b) a written agreement with any third-party beneficiary was required, and (c) the statute of limitations barred the RSPCA’s action.

In short, the Virginia Supreme Court, in a 6-1 decision, disagreed with Mr. Thorsen and agreed with the Circuit Court finding for the RSPCA.  By doing so, the Virginia Supreme Court found that a third-party beneficiary who is ‘clearly and definitely’ the intended beneficiary of a contract (even one where no written agreement exists) may sue to enforce its rights derived from the contract even though the third-party beneficiary may not know it is a beneficiary for many years (as is the case in most estate planning documents).  The lone dissenter argued that the majority was establishing a new cause of action against attorneys that should be created by way of legislation, not through the judiciary.  Furthermore, the dissent believes that the majority’s decision does not simply apply with respect to third-parties in an estate planning context, but will be applied to all legal malpractice actions.   

So, what does this mean for individuals looking to have estate planning documents prepared?  First, you should make sure you have read and understand your documents.  Otherwise, there is a chance that the estate planning documents do not capture your wishes and the result could be that unintended beneficiaries receive your estate.  Next, you may find that the estate planning process is more involved to ensure that you do understand your documents and have read them thoroughly.  And ultimately you should be working with an attorney who routinely prepares estate planning documents unlike in this case where it appears that Mr. Thorsen may not have regularly prepared wills. 

For attorneys, various commentators have said that likely there is a legislative fix in the works for the 2017 General Assembly session that may include passing a statute that allows for the correction of mistakes in wills, similar to the statute that applies to revocable living trusts.  But until then, practitioners may be unwilling to prepare wills and may only be willing to prepare revocable trusts.  Furthermore, practitioners will be watching to see if this decision is applied to other situations in which there is a potential third-party beneficiary.  Going forward, this is a case which highlights how both the attorney and the client should beware as the possibility for unintended consequences exists on both sides. #estateplanning #ThorsenvsRSPCA #thirdpartybeneficiary @bgnthebgn